Wall St. Firm Settles Case on Handling of E-Mail

Friday

Morgan Stanley will pay $12.5 million to resolve charges that it failed to produce e-mail and falsely stated that the messages were lost in the Sept. 11, 2001, attacks.

Morgan Stanley will pay $12.5 million to resolve charges that it failed to produce e-mail in arbitration cases and falsely stated that the messages were lost in the Sept. 11, 2001, attacks.

The settlement, announced yesterday by the Financial Industry Regulatory Authority, which regulates brokerage firms, calls for the firm to pay a $3 million fine and put $9.5 million into a fund to compensate several thousand investors who filed arbitration complaints.

Morgan Stanley did not admit wrongdoing.

The situation arose in part from the destruction of the firm’s New York City e-mail servers in the Sept. 11 attacks.

Millions of e-mail messages were presumed lost. But it was later revealed that they had been backed up on other servers or on the computers of individual employees.

“We didn’t find evidence that Morgan Stanley intended to hold back e-mails, but it was a case of one hand not knowing what the other was doing,” the authority’s chief of enforcement, Susan L. Merrill, said in an interview.

A Morgan Stanley spokesman, James Wiggins, said the company was pleased to settle and put the matter to rest.

Morgan Stanley agreed in February 2006 to pay $15 million to resolve Securities and Exchange Commission charges that it had failed to produce e-mail needed for investigations into initial public offerings and analyst research.

In December 2002, regulators fined Morgan Stanley and four other firms $1.65 million each for destroying e-mail messages.

In 2005, a Florida state court jury ordered Morgan Stanley to pay $1.58 billion to the billionaire Ronald O. Perelman over a failed 1998 merger. A state appeals court overturned the award. Mr. Perelman is appealing that ruling.

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